January 6, 2015

In 2014 Marin County experienced a continuation of strong demand and rising home prices with average RESI prices posting a +15% gain, after +20% in 2013, now currently just -2% below the 2007 all-time high. The median size home that sold in Marin ‘14 is 2,317sqft- an all-time high.

Marin County real estate market conditions were/are very similar to 2013, only with slowing price appreciation and slightly fewer unit sales. The buyer pool is narrower than is evident by the current tight inventory conditions (and data); many buyers are chasing the few finished homes in the prime locations and bidding those up to crazy levels. Less favorable locations are not seeing the same interest even at lower price levels. Our 2015 forecast anticipates strong buyer demand, low inventory relative to demand with stable to increasing prices.

The big change in Marin real estate continues to be the structural changes taking place in the San Francisco economy: the availability of more tech jobs in the city. In the past, tech workers rarely considered Marin due to the difficulty of driving thru the city to the broad tech job market on the Peninsula. The process of household formation is now underway and workers in the tech industry are seeking SF office space and tech companies are offering it to compete for talent. Tech buyers are now part of the buyer pool for many areas of Marin.

There are 5 new office buildings approved and in various stages of completion with the net effect that SF office space will increase +-40% over the next 10 years. In the previous decade 70,000 new jobs were created with only 10k new residential units- not so difficult to see why the upward pressure on SF home pricing. “Our approach to housing in San Francisco is dysfunctional,” said Scott Wiener, a San Francisco supervisor & proponent of new housing. “The system is intentionally designed to make it as difficult as possible to build new housing.” The same is true for most areas of Marin County.

This disparity between job growth and home growth in SF is a longer term issue & may aggravate future business cycles. The short and intermediate term will likely see resilience in the Bay Area real estate markets as new families struggle to find adequate housing.

Below: Average Marin County Home size by year- in individual towns, it is interesting to see significant fluctuation in selling home sizes from year to year- less variation at the county level.

Marin County average selling $/SQFT.

The below price index chart is an index that is formulated by our group and is affected by the changes in average size of home to sell from year to year in Marin County.

There are two components of home value: 1) Lot location value (proximity, exposure, grade etc) and all the rights that transfer with tile (taxes rates, public schools etc.); and 2) Structure value (Finish flow, curb appeal etc.). Everything about any home can be allocated to one of these two ‘buckets’. Across even relatively small sample sizes the primary differentiator between home values is primarily lot/location value- to the best of our knowledge this is the only place where you can find this data nationally.

All expansions come to an end and many are led by the capital markets. Keep a close eye on the stock market over the coming weeks, as even very wealthy people change their buying habits on the downswing.